This report contains forward-looking statements, which are subject to inherent
uncertainties. These uncertainties include, but are not limited to, variations
in weather, changes in the regulatory environment, customer preferences, general
economic conditions, increased competition, the outcome of outstanding
litigation, and future developments affecting environmental matters. All of
these are difficult to predict, and many are beyond the ability of the Company
to control.

Certain statements in this Annual Report on Form 10-K that are not historical
facts, but rather reflect the Company's current expectations concerning future
results and events, constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. The words "believes",
"expects", "intends", "plans", "anticipates", "hopes", "likely", "will", and
similar expressions identify such forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of the Company, or industry results, to differ materially from
future results, performance or achievements expressed or implied by such
forward-looking statements.

Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's view only as of the date of this Form
10-K. The Company undertakes no obligation to update the result of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events, conditions or circumstances.

OVERVIEW

The Company is a leading manufacturer of flexible metal hose, and is currently
engaged in a number of different markets, including construction, manufacturing,
transportation, petrochemical, pharmaceutical and other industries.

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The Company's business is managed as a single operating segment that consists of
the manufacture and sale of flexible metal hose and accessories. The Company's
products are concentrated in residential and commercial construction, and
general industrial markets. The Company's primary product, flexible gas piping,
is used for gas piping within residential and commercial buildings. Through its
flexibility and ease of use with patented fittings distributed under the
trademark AutoFlare®, TracPipe® and TracPipe® CounterStrike® flexible gas piping
allows users to substantially cut the time required to install gas piping, as
compared to traditional methods. Most of the Company's products are
manufactured at the Company's Exton, Pennsylvania facilities with a minor amount
of manufacturing performed in the United Kingdom. A majority of the Company's
sales across all industries are generated through independent outside sales
organizations such as sales representatives, wholesalers and distributors, or a
combination of both. The Company has a broad distribution network in North
America and to a lesser extent in other global markets.

CHANGES IN FINANCIAL CONDITION

The Cash balance was $8,257,000 at December 31, 2013, compared to $939,000 at
December 31, 2012, increasing $7,318,000 (779.3%) during the year. Net Income
attributable to Omega Flex, Inc. for 2013 was $10,037,000, which helped to
replenish cash throughout the year. The income for 2013 includes an accrual for
incentive compensation of approximately $2,800,000 which will not be paid until
the first quarter of 2014, and therefore adds to cash as of December 31, 2013.
The Company did however have a couple of significant outflows during 2013. On
December 31, 2013 the Company funded a dividend amounting to $4,289,000, which
is described in detail in Note 6, under Shareholders' Equity. In addition, the
Company also paid the UK Settlement of approximately $1,300,000, which is
detailed in Note 11, Commitments and Contingencies.

Accounts Payable has decreased $944,000 (34.5%), ending at $1,793,000 at
December 31, 2013, from a balance of $2,737,000 at December 31, 2012. The
majority of the change is timing related, with less payments due to vendors
outstanding at December 31, 2013 than experienced at December 31, 2012.

The Company's Line of Credit, discussed in detail within Note 5, had an
outstanding balance of $324,000 at December 31, 2012, but was paid off in its
entirety during the first quarter of 2013.

Accrued Compensation was $3,114,000 at December 31, 2013, compared with $349,000
at December 31, 2012, thus increasing $2,765,000 (792.3%). A majority of the
incentive compensation that was earned in 2012 was paid during the fourth
quarter of 2012. The accrual at December 31, 2013 represents the accumulation
of the current year's accrual for a full twelve months, as earned in correlation
with profits. Typically, incentive compensation is paid during the first
quarter of the following year, but in 2012 it was largely earned and paid in the
same year, thus diminishing the accrual at the end of that year.

Other Liabilities were $3,575,000 at December 31, 2013, compared to $4,214,000
at December 31, 2012. As disclosed in Note 11, Commitments and Contingencies,
the Company's subsidiary, OFL, had been sued regarding the installation of
TracPipe product in an apartment complex in England. The Company had reached a
settlement of approximately $1,300,000 regarding this issue in March of 2013,
and recorded the amount in Other Liabilities as of December 31, 2012. OFL then
paid $1,300,000 during March of 2013 and thus diminished the balance of the
liability accordingly, which accounts for a majority of the change between
periods. This event along with various other partially offsetting items
accounts for the 15.2% change in years of $639,000.

Net Sales. The Company's 2013 fourth quarter Net Sales increased $3,434,000
(18.6%) over the same period in 2012, ending at $21,860,000 for the three-months
ended December 31, 2013, compared to $18,426,000 for the same three months in
2012.

Net Sales have expanded over the prior year partially due to improvements in the
residential construction industry. The sales results also appear to demonstrate
a preference for the Company's products and performance, as they are
statistically exceeding the growth experienced in the CSST market place for the
fourth quarter. An increase in volume, or units sold, accounts for the majority
of the change compared to the prior year, and there was also a slight rise in
pricing.

Gross Profit. The Company's gross profit margins have increased between the two
periods, being 55.3% and 52.6% for the three-months ended December 31, 2013 and
2012, respectively. The favorable change resulted from a combination of items,
including the pricing action noted above, and the Company's ability to find
various efficiencies in procurement and manufacturing processes, and increased
production volume also helped to better absorb certain fixed manufacturing
overhead costs.

Selling Expenses. Selling expenses consist primarily of employee salaries and
associated overhead costs, commissions, and the cost of marketing programs such
as advertising, trade shows and related communication costs, and freight.
Selling expense was $3,525,000 and $3,207,000 for the three-months ended
December 31, 2013 and 2012, respectively, representing an increase of $318,000.
Commissions and Freight together accounted for the majority of the change,
increasing $233,000, largely associated with the increase in sales volume.
Sales expense as a percent of net sales has however decreased, being 16.1% for
the three-months ended December 31, 2013, compared to 17.4% for the three-months
ended December 31, 2012.

General and Administrative Expenses. General and administrative expenses
consist primarily of employee salaries, benefits for administrative, executive
and finance personnel, legal and accounting, insurance, and corporate general
and administrative services. General and administrative expenses were
$3,225,000 and $4,363,000 for the three-months ended December 31, 2013 and 2012,
respectively, decreasing $1,138,000 between periods. Legal related costs
decreased $1,756,000. As announced on March 20, 2013, the Company's English
subsidiary, Omega Flex Limited, had reached an agreement to settle litigation
related to a construction project in Milton Keynes, England, to avoid any
potentially prolonged and costly legal conflict. The amount of the settlement
equated to approximately $1,300,000. Inversely, the Company recognized a
$651,000 increase in administrative staffing expenses, mostly related to
incentive compensation in conjunction with higher profits. As a percentage of
sales, general and administrative expenses decreased to 14.8% for the three
months ended December 31, 2013 from 23.7% for the three months ended December
31, 2012.

Engineering Expense. Engineering expenses consist of development expenses
associated with the development of new products, and costs related to
enhancements of existing products and manufacturing processes. Engineering
expenses increased $74,000 for the quarter. They were $741,000 and $667,000 for
the three months ended December 31, 2013 and 2012, respectively. Engineering
expenses as a percentage of sales were 3.4% for the three months ended December
31, 2013, and 3.6% for the three months ended December 31, 2012.

Operating Profit. Reflecting all of the factors mentioned above, Operating
Profits increased by $3,141,000, rising 215% over last year. The Company had a
profit of $4,602,000 in the three-month period ended December 31, 2013, versus a
profit of

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$1,461,000 in the three-months ended December 31, 2012. Excluding the UK
settlement discussed above, less its applicable auxiliary costs, operating
profits were actually higher by 80.5% versus the prior year.

Interest Income (Expense). Interest income is recorded on cash investments, and
interest expense is recorded at times when the Company has debt amounts
outstanding on its line of credit. The interest income (expense) was nominal
for the fourth quarter of 2013 and 2012, and both periods had similar amounts of
income.

Other Income (Expense). Other Income (Expense) primarily consists of foreign
currency exchange gains (losses) on transactions with Omega Flex Limited, our
U.K. subsidiary.

Income Tax Expense. Income Tax Expense was $1,373,000 for the fourth quarter of
2013, compared to $754,000 for the same period in 2012. The $619,000 increase
was primarily due to higher income before taxes. The Company's effective tax
rate in 2013 was 29.9% of pretax income compared to 51.2% in 2012. The
significant change was largely the result of the significant loss in the UK
during the fourth quarter of 2012, which has a much lower tax rate than in the
US. UK operations were however profitable during the same period in 2013. The
rates for both periods do not differ materially from expected statutory rates.

Twelve months ended December 31, 2013 vs. December 31, 2012

The Company reported comparative results from continuing operations for the
twelve-month period ended December 31, 2013 and 2012 as follows:

Net Sales. The Company's Net Sales for 2013 increased $13,106,000 (20.5%) over
the same period in 2012, ending at $77,122,000 and $64,016,000 in 2013 and 2012,
respectively.

Net Sales have received a boost over the prior year partially due to
improvements in the residential construction industry. The sales have also
gained market share over competitor products, such as black iron pipe, as they
are statistically exceeding the growth experienced in the housing market during
the year. An increase in volume, or units sold, accounts for the majority of
the change compared to the prior year, and there was also a slight rise in
pricing.

Gross Profit. The Company's gross profit margins have increased between the two
periods, being 54.3% and 51.4% for the twelve-months ended December 31, 2013 and
2012, respectively. The improvement resulted from a combination of items,
including the pricing action noted above, and the Company's ability to find
various efficiencies in procurement and manufacturing processes. Increased
production volume also allowed for better absorption of certain fixed
manufacturing overhead costs.

Selling Expenses. Selling expenses consist primarily of employee salaries and
associated overhead costs, commissions, and the cost of marketing programs such
as advertising, trade shows and related communication costs, and freight.
Selling expense was $12,954,000 and $12,256,000 for 2013 and 2012,
respectively, representing an increase of $698,000. Commissions and Freight
increased by $1,019,000 compared to last year, largely attributable to the
increase in sales volume. The increases in Commissions and Freight were however
softened by a decrease in advertising relating expenses. Sales expense is
however lower than the prior year when compared as a percent of net sales, being
16.8% for 2013, and 19.1% for 2012.

General and Administrative Expenses. General and administrative expenses
consist primarily of employee salaries including incentive compensation,
benefits for administrative, executive and finance personnel, legal and
accounting, insurance, and corporate general and administrative services.
General and administrative expenses were $11,133,000 and $12,030,000 for the
twelve-months ended December 31, 2013 and 2012, respectively, decreasing
$897,000 between periods. Legal expenses have decreased by $1,944,000, mostly
due to the previously mentioned UK settlement recorded in 2012 of approximately
$1,300,000.

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The decrease in legal was however partially offset by a $942,000 increase in
administrative staffing expenses during 2013, mostly related to incentive
compensation earned in association with higher profits, and various other
insignificant items. As a percentage of sales, general and administrative
expenses were 14.4% and 18.8% for 2013 and 2012, respectively.

Insurance Legal Recovery. As previously disclosed in a Form 8-K/A filed with
the Securities and Exchange Commission on March 15, 2012, the Company agreed to
settle a legal dispute relating to insurance coverage and received $4,700,000 as
part of the settlement during that same month. This receipt was all recorded as
income during the first quarter of 2012. There was no comparable event during
2013, and thus the change between periods is $4,700,000. This event also
impacted incentive compensation, which is included in the General and
Administrative Expenses, and Income Tax Expenses, increasing both significantly
compared to this year.

Engineering Expense. Engineering expenses consist of development expenses
associated with the development of new products, and costs related to
enhancements of existing products and manufacturing processes. Engineering
expenses have increased $161,000 between periods, as they were $2,758,000 during
2013, and $2,597,000 in 2012. Engineering expenses as a percentage of sales
were 3.6% for the year ended December 31, 2013, and were 4.1% for the full year
of 2012.

Operating Profit. Reflecting all of the factors mentioned above, Operating
Profits increased $4,301,000 or 40%, ending with a profit of $15,048,000 for
2013, compared to $10,747,000 in 2012. Excluding the Insurance Legal Recovery
and the UK settlement discussed above, less their applicable auxiliary costs,
operating profits were actually higher by 90.6% versus the prior year.

Interest Income (Expense). Interest income is recorded on cash investments, and
interest expense is recorded at times when the Company has debt amounts
outstanding on its line of credit. The net interest income was nominal during
2013 and 2012, and both periods had similar amounts of income.

Other Income (Expense). Other Income (Expense) primarily consists of foreign
currency exchange gains (losses) on transactions with Omega Flex Limited, our
U.K. subsidiary.

Income Tax Expense. Income Tax Expense was $4,891,000 in 2013, compared to
$4,046,000 for the same period in 2012, increasing by $845,000, largely in
correlation with the change in income before taxes. The Company's effective tax
rate in 2013 was 33% of pretax income compared to 37% in 2012. The rates in
both years do not differ materially from expected statutory rates, based upon
the jurisdictions in which the income was earned.

COMMITMENTS AND CONTINGENCIES

See Note 11 to the Company's financial statements for a detailed description of
Commitments and Contingencies.

FUTURE IMPACT OF KNOWN TRENDS OR UNCERTAINTIES

The Company's operations are sensitive to a number of market and extrinsic
factors, any one of which could materially adversely affect its results of
operations in any given year:

Construction Activity-The Company is directly impacted by the level of single
family and multi-family residential housing starts and, to a lesser extent,
commercial construction starts. The construction industry can be cyclical,
shifting upwards and downwards depending on a variety of factors. After a few
years of significant building, the United States construction industry appeared
to hit a peak in 2006. Low interest rates and easy availability of credit,
contributed to a high level of construction activity. However, following that
period, the industry experienced a significant deterioration in demand for
residential, commercial and institutional construction.

Some of the factors that influenced the decline include:

·

the crisis in the financial markets reduced the availability of financing for
new construction, especially large projects

·

foreclosures had increased the inventory of available residential housing,
thereby decreasing the demand for new construction, and

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·

consumer demand and confidence declined as a result of reduced economic activity
and increased unemployment.

During 2012 and 2013, the construction activity appeared to reflect a recovery,
and has shown upward mobility. Statistics provided by the National Association
of Home Builders suggests housing starts will continue to increase during the
coming year. However, any significant decrease in residential construction
activity may materially adversely affect the Company's financial condition.

Technological Changes-Although the HVAC industry has historically been impacted
by technology changes in a relatively incremental manner, it cannot be
discounted that radical changes-such as might be suggested by fuel cell
technology, burner technology and/or other developing technologies which might
impact the use of natural gas-could materially adversely affect the Company's
results of operations and/or financial position in the future.

Weather Conditions-The Company's flagship TracPipe® and CounterStrike ® products
are used in residential and commercial heating applications. As such, the demand
for its products is impacted by weather as it affects the level of construction.
Furthermore, severe climatic changes, such as those suggested by the "global
climate change" phenomenon, could over time adversely affect the demand for
fossil fuel heating products and adversely affect the Company's results of
operations and financial position.

Purchasing Practices-It has been the Company's policy in recent years to
aggregate purchase volumes for high value commodities with fewer vendors to
achieve maximum cost reductions while maintaining quality and service. This
policy has been effective in reducing costs, but has introduced additional risk
which could potentially result in short-term supply disruptions or cost
increases from time to time in the future if one of the Company's key vendors
experiences any catastrophic event, such as bankruptcy.

Legal Costs -The Company is subject to lawsuits mostly relating to claims of
product liability. The Company has in place insurance policies to cover the
defense of most of these cases, and any amounts payable with respect thereto,
are typically subject to deductibles or self-insured retention amounts that vary
depending on the policy year. The Company is vigorously defending these cases,
and in 2013 was successful in obtaining a couple favorable outcomes. However,
continued litigation and the defense costs associated therewith, in addition to
any other payments made, could affect the company's results of operations,
perhaps materially, and could potentially inhibit the Company from obtaining
insurance in the future through mainstream markets at an affordable price.

Supply Disruptions and Commodity Risks-The Company uses a variety of materials
in the manufacture of its products, including stainless steel, polyethylene and
brass for its AutoFlare® connectors. In connection with the purchase of
commodities, principally stainless steel for manufacturing requirements, the
Company occasionally enters into one-year purchase commitments which include a
designated fixed price or range of prices. These agreements sometimes require
the Company to accept delivery of the commodity in the quantities committed, at
the agreed upon prices. Transactions required for these commodities in excess
of the one year commitments are conducted at current market prices at the
Company's discretion. Currently, the Company does not have any fixed purchase
commitment contracts, but may enter into such transactions in the future.

Management believes at present that it has adequate sources of supply for its
raw materials and components (subject to the risks described above under
Purchasing Practices) and has historically not had significant difficulty in
obtaining the raw materials, component parts or finished goods from its
suppliers. The Company is not dependent for any commodity on a single supplier,
the loss of which would have a material adverse effect on its business.

Interest Rate Sensitivity - The Company currently has access to a $10,000,000
line of credit (LOC) with Santander Bank, formerly Sovereign Bank, NA
(Sovereign), and as of December 31, 2013, has no outstanding amounts due on the
line. When the Company borrows against the LOC, all amounts must be paid back
with interest, using an interest rate range of LIBOR plus 1.75% to LIBOR plus
2.75% or Prime less 0.50% to Prime plus 0.50%, depending upon the Company's then
existing financial ratios. The Company may elect to use either the LIBOR or
PRIME rates. As of December 31, 2013, the actual rate to borrow was at
approximately 2.00%. Interest rates are also significant to the Company as a
participant in the residential construction industry, since interest rates can
be a determinant factor on whether or not borrowing funds for building will be
affordable to our customers. (See Construction Activity, above). Currently,
interest rates are at historic lows, but any dramatic change to interest rates
could have a detrimental effect on the business.

Retention of Qualified Personnel - The Company does not operate with multiple
levels of management. It is relatively "flat" organizationally, which does
subject the Company to the risks associated with the loss of critical managers.
From time to

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time, there may be a shortage of skilled labor, which may make it more difficult
and expensive for the Company to attract and retain qualified employees. The
Company is dependent upon the relatively unique talents and managerial skills of
a small number of key executives.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

Financial Reporting Release No. 60, released by the Securities and Exchange
Commission, requires all companies to include a discussion of critical
accounting policies or methods used in the preparation of financial statements.
Note 2 in the Notes to the Consolidated Financial Statements include a summary
of the significant accounting policies and methods used in the preparation of
our Consolidated Financial Statements. The following is a brief discussion of
the Company's more significant accounting policies.

The preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. The most significant estimates and assumptions relate to
revenue recognition, inventory valuations, goodwill and intangible asset
valuations, product liability costs, phantom stock and accounting for income
taxes. Actual amounts could differ significantly from these estimates.

Our critical accounting policies and significant estimates and assumptions are
described in more detail as follows:

Revenue Recognition

The Company's revenue recognition activities relate almost entirely to the
manufacture and sale of flexible metal hose and pipe. Under GAAP, revenues are
considered to have been earned when the Company has substantially accomplished
what it must do to be entitled to the benefits represented by the revenues. The
following criteria represent preconditions to the recognition of revenue:

·

Persuasive evidence of an arrangement for the sale of product or services must
exist.

·

Delivery has occurred or services rendered.

·

The sales price to the customer is fixed or determinable.

·

Collection is reasonably assured.

The Company generally recognizes revenue upon shipment in accordance with the
above principles.

Gross sales are reduced for all consideration paid to customers for which no
identifiable benefit is received by the Company. This includes promotional
incentives, which includes various programs including year-end rebates and
discounts. The amounts of certain incentives are known with reasonable
certainty at the time of sale, while others are projected based upon the most
reliable information available at the reporting date.

Commissions, for which the Company receives an identifiable benefit, are
accounted for as a selling expense.

Accounts Receivable

Accounts receivable are reduced by an allowance for amounts that may become
. . .